HMRC plan to replace tax returns with digital tax accounts

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26th August 2016

HMRC are planning to replace tax returns with digital tax accounts by 2020. Millions of people have the dreaded and time-consuming task of filling in tax return forms every year so HMRC are introducing new digital tax accounts that aim to make paying tax easier and much more efficient.

The accounts will store the taxpayer’s details in one place so it’s easier for them to understand what they need to pay and when. They are very easy to use, secure and easily accessible so with just one check, people will know how much they owe.

HMRC have predicted that the new digital tax accounts will reduce the number of customer calls from 38 million to 15 million so the general customer service provided by HMRC will improve.

Digital tax will be a massive help for small businesses because they will be able to link their own accounting software and bank accounts to the digital tax account. This means they no longer need to fill out a tax return form or pay an annual tax bill. They will also be able to pay their tax bills at any time without having to submit information that HMRC already has.

Many critics believe the initiative is unrealistic and unachievable by 2020. However, HMRC’s plan is extremely detailed and several significant changes have already been made on time.

Due to the scale of the changes to the tax system, the government want to hear feedback from people that will be affected. They have released six consultation papers, specifically aimed at small businesses and landlords that cover different areas of the new system. The links to the six consultation papers are linked below.

Making Tax Digital: Bringing business tax into the digital age

Business Income Tax: Simplifying tax for unincorporated businesses

Business Income Tax: Simplified cash basis for unincorporated property business

Making Tax Digital: Voluntary pay as you go

Making Tax Digital: Tax administration

Making Tax Digital: Transforming the tax system through the better use of information

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